As WeWork heads towards its IPO and a vital capital raising, it is being plagued with bad news. Following a scathing article in the Wall Street Journal that exposed the lavish lifestyle of CEO Adam Neumann and his seemingly overly-personal business investment choices, even more bad news is on the horizon.
Two senior executives, both in communications and both at c-suite level, have left the business; the first for ‘personal reasons’ and the second for another role.
This is just the type of instability that causes valuations to fluctuate and WeWork’s majority shareholder – SoftBank – has reportedly expressed concerns about the timing of a listing more the loss-making business.
This has been magnified again by confirmed reports that Neumann took $6m from the company to secure rights to the ‘We’ trademark. This amount has since been returned, but it appears to be tidying up for when officials look through the books.
This is a very high profile listing and one that will garner a huge amount of interest. It’s also creating interest from outside investment and tech circles for two reasons. Firstly, the clarification of the business itself, with reporters asking if WeWork is a tech business or a real estate investment firm…and one that holds no assets. WeWork has a strategy of leasing space for a long period of time and subleasing, so there are no investments as a hedge. Additionaly, this model has yet to be tested in a recession. The second issue is the balance sheet. WeWork has never and will possibly never, turn a profit. That fact has people wondering how capital can be raised by leveraging a lease and short term tenancies with now promises of a long term outcome.
There will be more questions coming up and it will be interesting to see the response from the business and the community in general.